ALGORITHM PRICE PREDICTION

Did the stock market really recover from the COVID-19 pandemic crash?While nominal numbers might suggest a resounding ""yes,"" a deeper dive, especially when measured in Bitcoin (BTC), paints a starkly different picture.The seemingly impressive gains evaporate when viewed through the lens of BTC, revealing that, relative to this cryptocurrency, the stock market's recovery has been, at best, an illusion. The cumulative response of Bitcoin was positive before COVID-19, decreased slightly from the Pre-COVID-19 to the 2025 onwards period, and became negative for the period from COVID-19 onwards. It is important to note that the sample size after COVID-19 is small, so any conclusions drawn should be made with caution.This counterintuitive perspective challenges conventional wisdom and forces us to re-evaluate the true performance of traditional assets in an era defined by unprecedented monetary stimulus and escalating inflationary pressures. The study found that Bitcoin and Ethereum had a positive relationship with the forward inflation expectation only in a certain short period surrounding the onset of the COVID-19. A few studiesThe global financial landscape shifted dramatically after the pandemic hit, with governments injecting massive amounts of money into the economy, leading investors to seek alternative hedges against inflation. This market recovery is evidence of the second lesson: One can never predict how fast a recovery will be. But the last year has also been a stark reminder that the stock market is not the economy .This article will explore how Bitcoin has not only outperformed stocks in this environment but also potentially acts as a leading indicator of future inflation, offering a new framework for assessing asset performance and economic stability. Using a vector autoregressive process, we find that changes in Bitcoin Granger cause changes in the forward inflation rate. Furthermore, imposing an exogenous shock to Bitcoin s price results in a persistent increase in the forward inflation rate.We will also delve into Bitcoin's role as an inflation hedge, examining both its potential and limitations in comparison to traditional safe-haven assets like gold and U.S. Bitcoin has fared better than stocks but worse than gold and U.S. Treasuries during the coronavirus pandemic, with investors ascribing its performance to speculative bets and bids to hedgeTreasuries. Since news of inflation brings the idea that central banks are going to raise interest rate targeting even further up, for the moment, bitcoin has a short-term inverse correlation withIs Bitcoin the ultimate inflation escape, or just a highly speculative bubble?

The Bitcoin-Denominated Stock Market: A Reality Check

Conventional wisdom suggests that the stock market bounced back robustly after the initial COVID-19 crash, driven by stimulus packages and a surge in tech stocks.However, looking at the market’s performance when priced in Bitcoin provides a radically different narrative. Bitcoin appreciates against inflation (or inflation expectation) shocks, confirming its inflation-hedging property claimed by investors. However, unlike gold, Bitcoin prices decline in response to financial uncertainty shocks, rejecting the safe-haven quality.In BTC terms, much of the stock market’s supposed recovery simply vanishes. While investors often claim Bitcoin as a hedge against monetary stimulus prevalent during and after the Global Financial Crisis as well as during the recent COVID-19 pandemic, the inflation-hedging property has not been directly tested due to the lack of realized inflation data at a high frequency.This is because Bitcoin itself has experienced significant appreciation, particularly relative to fiat currencies.The price of stocks, when divided by the price of BTC, tells a story of stagnation, or even decline, highlighting the erosion of purchasing power when holding traditional equities compared to digital assets.

Why Price in Bitcoin?

Why use Bitcoin as a measuring stick? CNBC is the world leader in business news and real-time financial market coverage. Find fast, actionable information.There are several compelling reasons:

• Scarcity: Bitcoin's limited supply (21 million coins) makes it a potentially superior store of value compared to fiat currencies, which can be inflated by central banks.
• Global, Decentralized Nature: Bitcoin operates outside the control of any single government or institution, making it a hedge against geopolitical risks and monetary policy manipulations.
• Inflation Hedge Narrative: Many investors view Bitcoin as a digital gold, a store of value that can protect against inflation.

Consider this hypothetical example: If the S&P 500 doubled in value from 3,000 to 6,000 points, but Bitcoin increased fivefold during the same period, the S&P 500’s performance, when denominated in Bitcoin, would actually show a decline. 2025 COVID-19 Pandemic: The global economic uncertainty caused by the COVID-19 pandemic led to massive monetary stimulus by governments. Bitcoin s value increased significantly as millions of small-time investors looked for accessible inflation hedges.This highlights how crucial it is to consider the relative performance of assets, especially in times of monetary expansion and inflationary pressures.

Bitcoin as an Inflation Hedge: Myth or Reality?

The debate surrounding Bitcoin's role as an inflation hedge is ongoing.While proponents tout its limited supply as a safeguard against currency debasement, skeptics point to its volatility and speculative nature.Recent studies provide valuable insights into this complex relationship.

Evidence from Research

Several studies have explored the connection between Bitcoin and inflation, yielding mixed but intriguing results.One study using a vector autoregressive process found that changes in Bitcoin's price can actually Granger-cause changes in the forward inflation rate. While uncovering whether an asset is a good inflation hedge can only be done in hindsight, our team believes that bitcoin s unique characteristics, global reach, and growth potential are making it a promising alternative to the current tools available to hedge against inflation.This suggests that Bitcoin might not just be reacting to inflation; it could be influencing inflation expectations.

Specifically, the research indicated that an exogenous shock to Bitcoin's price leads to a persistent increase in the forward inflation rate. Bitcoin and gold denominated stock market performance wipes out almost any hint of recovery since March. Bitcoin, in fact, crushed stock markets during the Covid-19 recovery withThis finding supports the idea that Bitcoin is not merely a passive recipient of inflationary pressures but an active participant in shaping them. During the recent COVID-19 pandemic, many commonalities shared by Bitcoin and gold raise the question of whether Bitcoin can hedge inflation or provide a safe haven as gold often does. By estimating a Vector Autoregression (VAR) model, we provide systematic evidence on the relationship among inflation, uncertainty, and Bitcoin and gold prices.Furthermore, the research suggests Bitcoin appreciates against inflation shocks, confirming its inflation-hedging property. Bitcoin together with all those Bitcoin spot ETFs like IBIT, FBTC, BITO, ARKB, BITB, HODL, BRRR, EZBC, BITX and BTCW as well as the Grayscale Bitcoin Trust has staged a stunning recovery since itsHowever, unlike gold, Bitcoin prices tend to decline in response to financial uncertainty shocks, highlighting its risk-on characteristic.This difference is significant because gold has traditionally been viewed as a safe haven during periods of financial turmoil.

The COVID-19 Pandemic and Bitcoin's Rise

The COVID-19 pandemic served as a real-world stress test for Bitcoin's inflation-hedging capabilities.The global economic uncertainty triggered by the pandemic prompted massive monetary stimulus from governments worldwide.This flood of liquidity, coupled with concerns about inflation, fueled a surge in Bitcoin's price as investors sought accessible hedges against the potential erosion of their purchasing power.

Millions of small-time investors flocked to Bitcoin, recognizing its potential to preserve wealth in an inflationary environment.This influx of capital contributed to Bitcoin's significant appreciation, further solidifying its reputation as an alternative store of value.However, research shows that the positive relationship between Bitcoin and forward inflation expectation was mostly limited to a short period around the onset of the COVID-19 pandemic.

Bitcoin vs.Gold: The Inflation Hedge Showdown

The similarities between Bitcoin and gold have led to comparisons between the two assets as potential inflation hedges and safe havens.Both are seen as limited-supply assets that can protect against currency devaluation.

Key Differences

Despite their similarities, Bitcoin and gold have distinct characteristics that make them suitable for different investment strategies.

• Volatility: Bitcoin is significantly more volatile than gold, making it a riskier investment.
• Liquidity: Gold has a more established and liquid market compared to Bitcoin.
• Acceptance: Gold has a longer history of acceptance as a store of value compared to Bitcoin, which is still a relatively new asset.
• Correlation with Uncertainty: While Bitcoin appreciates against inflation, research suggests it is negatively correlated with financial uncertainty shocks.Gold, on the other hand, typically rallies during periods of uncertainty, making it a more reliable safe haven.

During the coronavirus pandemic, Bitcoin fared better than stocks but worse than gold and U.S.Treasuries, suggesting that investors still view it as a speculative asset rather than a true safe haven.

Which One is the Better Inflation Hedge?

The answer depends on an investor's risk tolerance and investment goals.Gold has a proven track record as a safe haven and inflation hedge, while Bitcoin offers the potential for higher returns but comes with greater volatility.Ultimately, the decision of which asset to choose depends on individual circumstances and investment objectives.

Beyond Inflation: Bitcoin's Broader Economic Impact

Bitcoin's impact extends beyond its role as a potential inflation hedge.Its decentralized nature and disruptive potential are transforming the financial landscape.

Decentralization and Financial Inclusion

Bitcoin's decentralized nature challenges the traditional financial system by offering an alternative to central banks and intermediaries.This can promote financial inclusion by providing access to financial services for individuals who are underserved by traditional institutions.

Innovation and Technological Advancement

Bitcoin's underlying blockchain technology has spurred innovation in various industries, including finance, supply chain management, and healthcare.This technological advancement has the potential to drive economic growth and improve efficiency.

Challenges and Risks

Despite its potential benefits, Bitcoin faces several challenges and risks, including:

1. Volatility: Bitcoin's high volatility can make it a risky investment.
2. Regulation: The regulatory landscape for Bitcoin is still evolving, creating uncertainty for investors and businesses.
3. Security: Bitcoin exchanges and wallets are vulnerable to hacking and theft.
4. Scalability: Bitcoin's transaction processing capacity is limited, which can lead to slow transaction times and high fees.

Investing in Bitcoin: A Practical Guide

If you are considering investing in Bitcoin, it is crucial to do your research and understand the risks involved.Here are some practical tips to get you started:

Due Diligence

Before investing in Bitcoin, conduct thorough research on the technology, the market, and the risks involved.Understand the different factors that can influence Bitcoin's price, such as regulatory developments, technological advancements, and market sentiment.Read up on the many Bitcoin ETFs such as IBIT, FBTC, BITO, ARKB, BITB, HODL, BRRR, EZBC, BITX and BTCW as well as the Grayscale Bitcoin Trust, and other ways you can invest in Bitcoin without owning it directly.

Diversification

Do not put all your eggs in one basket.Diversify your investment portfolio by allocating a small percentage to Bitcoin.This will help mitigate the risk of losses if Bitcoin's price declines.

Risk Management

Only invest what you can afford to lose. Bitcoin is a volatile asset, and its price can fluctuate significantly.Set a clear investment strategy and stick to it, regardless of market conditions.Consider using stop-loss orders to limit potential losses.

Secure Storage

Protect your Bitcoin by storing it in a secure wallet.Consider using a hardware wallet or a multi-signature wallet to enhance security.Always keep your private keys safe and never share them with anyone.

Looking Ahead: The Future of Bitcoin and Inflation

The future of Bitcoin and its relationship with inflation remains uncertain.As the cryptocurrency market matures and regulatory frameworks evolve, Bitcoin's role in the global financial system will continue to be shaped.

Scenario 1: Bitcoin Becomes a Mainstream Inflation Hedge

If Bitcoin continues to gain acceptance as a store of value and its volatility decreases, it could become a mainstream inflation hedge, rivaling gold and other traditional assets.This would further solidify its position as a disruptive force in the financial industry.

Scenario 2: Bitcoin Remains a Speculative Asset

If Bitcoin fails to gain mainstream acceptance and remains a highly volatile asset, it could continue to be viewed as a speculative investment rather than a reliable inflation hedge.This would limit its potential impact on the global financial system.

Scenario 3: Bitcoin Faces Regulatory Hurdles

If governments around the world impose strict regulations on Bitcoin, it could hinder its growth and adoption.This could undermine its ability to serve as an inflation hedge and limit its potential to disrupt the traditional financial system.

Conclusion: Rethinking Asset Performance in the Bitcoin Age

The observation that stocks haven't recovered from COVID-19 in Bitcoin terms offers a powerful reminder that context matters.Evaluating asset performance solely in fiat currency terms can be misleading, especially during periods of significant monetary expansion and inflation. Bitcoin, with its limited supply and decentralized nature, provides a unique lens through which to assess the true value of traditional assets.While the debate on whether Bitcoin is a true inflation hedge continues, its potential to influence inflation expectations and serve as an alternative store of value cannot be ignored.

Key takeaways:

• The stock market's ""recovery"" since COVID-19 looks less impressive when measured in Bitcoin.
• Bitcoin may act as a leading indicator of inflation, not just a reaction to it.
• Bitcoin offers a potential alternative to traditional inflation hedges like gold, but comes with its own set of risks.
• Investing in Bitcoin requires careful research, diversification, and risk management.

As the financial landscape continues to evolve, it is crucial to remain open-minded and consider alternative perspectives when evaluating asset performance.The rise of Bitcoin challenges conventional wisdom and prompts us to rethink our understanding of value, inflation, and the future of finance.Are you ready to consider Bitcoin as a part of your investment strategy?Speak with a financial advisor today to assess your risk tolerance and learn more!